Money Market Accounts Defined | Pros / Cons
Money market accounts are very similar to a savings account in that you deposit funds which accrue interest over time. Money Market Accounts are, for the most part, FDIC insured(the accounts on bank truth are all FDIC), and recently that insurance amount has recently increased to a maximum of $250,000. It used to be that money market accounts differed than savings by offering higher APY (Annual Percentage Yields) rate than savings accounts. However, recently there has been a shift in some banks using the terms money market and savings interchangeably.
Money Markets are Liquid & Safe
Money Market Accounts carry with them a limitation (in most banking institutions) that restricts the number of withdrawals permitted to a total of six per month. Money market accounts have a similarity to checking accounts because they typically offer check writing as part of the account services. Money markets differ greatly from CDs (Certificates of Deposit) because they are one of the more liquid accounts available. Where CDs penalize you for withdrawals and sometimes savings accounts carry some penalties for withdrawals, most money markets do not penalize you for withdrawing your money. Money markets are very safe because as mentioned before they are FDIC insured and cannot lose money whereas a money market fund can.
Money Market Accounts Versus Money Market Fund
Be aware that investment in a money market fund is very different than putting your money into a money market account. The most important difference is that money market fund investments are not insured by the FDIC.
Finding the Best Money Market
When shopping for a money market account, you can usually bet that the online banks which offer online money market accounts will have a higher interest rate. Money market rates can vary quite dramatically from one bank to another so the best money market rate will require you to get an unbiased review of the bank and account. This is what banktruth.org offers is a one stop shop for all your banking and savings needs.
Strategy with Money Market Rates
It is important to note that the most successful approach with a money market account is consistency in depositing or transferring money into the account. In this way, not only does it accrue interest but you set aside that money on a regular basis. Having a high interest rate or APY yield is only part of the picture. If you only have $1 in an 5% interest rate money market account you won’t make more than the person who has $1000 in a money market account with an interest rate of 1%.
Flexible, High Yield, Online = Money Market Accounts
In summary, money market rates are higher than savings accounts and checking. While long term CD promises a higher rate of return on your money, you also have to lock down your finances and if you are looking for a liquid, flexible, convenient way to make money on your money, then a money market account is just what you need!